If demand is perfectly inelastic, the price elasticity of demand is equal to:
A. 1.
B. 0.
C. infinity.
D. a negative number between 0 and infinity.
Answer: B
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Suppose some workers are capable and others are extraordinary. Firms are willing to pay capable workers a salary of $12,000 and extraordinary workers a salary of $15,000
Workers know if they are capable or extraordinary but firms do not (that is, ability is private information). It would cost a capable person $6,000 to earn a college degree but it would cost an extraordinary person just $2,000 to earn a college degree since they can finish their education much faster. Show that in equilibrium in this labor market (i) extraordinary people go to college but capable people do not, and (ii) firms pay college graduates $15,000 and high school graduates $12,000 .
A country that creates competitive advantage where there are not comparative advantages misallocates its resources and has lower national well being
Indicate whether the statement is true or false
Which of the following bond ratings by Moody's Investors Service would NOT be considered to be below investment grade?
A) Baa B) Ba C) B D) All of these ratings are considered below investment grade.
In the new Keynesian model, if an aggregate demand increase is anticipated, then ________
A) aggregate demand will not change B) short-run aggregate supply will shift up immediately C) short-run aggregate supply will shift down immediately D) there is no immediate effect on the short-run supply curve